The Business Of The Bracket: How Vegas And Businesses Capitalize On March Madness

While NCAA officials and athletic directors debate over whether student-athletes should be paid more than the scholarships they receive, March Madness has turned into a mega business. From a business perspective, cities hosting March Madness games--especially Atlanta which will host the Final Four--stand to gain lucratively. Apparel companies, including Nike, adidas and Under Armour, will see a boost in sales as their logos are postured on team's jerseys throughout the tournament. However, it may not be host cities or apparel companies that stand to make the most from March Madness. Rather, the bulk of the March Madness money is likely to be made on sports betting.

When it comes to betting, experts expect more money to be spent on March Madness than the Super Bowl. According to RJ Bell, the owner of Pregame.com, $12 billion dollars will be spent worldwide on March Madness betting. This exceeds the $10 billion bet on the Super Bowl worldwide. However, Bell notes that comparing the amount of money spent on betting for the two events may not be wise, as the Super Bowl draws that amount of bets for just one game, whereas March Madness sees its amount over the span of 67 games.

Interestingly, Bell asserts that only 1 percent of the amount wagered on March Madness comes from bets placed in Nevada. This is notable, as sports betting is legal in only four states in the United States: Oregon, Montana, Delaware and Nevada. Currently, the state of New Jersey is wading through litigation in its attempt to legalize sports betting in the state. The NCAA and other major leagues have opposed New Jersey's legislation through litigation. That only 1 percent of the bets made on March Madness are placed in one of the four states where sports betting is legalized demonstrates the widespread nature of illegal sports betting. "Nevada has less than one percent of the business because it's so big elsewhere. Even five to six years ago, there were three main ways to bet outside of Nevada: the barroom bookie, online sports books and regulated license books in Europe. What happened then, is that the U.S. government tried very hard to prevent people from getting money offshore. As a result, per head shops popped up where any barroom bookie can pay to login to their own domain where their customers can place bets. This caused a lot of growth in sports betting, because it offered flexibility through online convenience with the varied offerings of an online book and the personal connection and level of certainty of being paid that a bookie offers," Bell explained.

Betting on March Madness has become so big that it is expected over 100 million people will take part in tournament bracket contests. That number roughly amounts to one-third of the U.S. population. Businesses capitalize upon the fascination with March Madness by hosting their own bracket challenges. For instance, even though it's no secret that the newspaper industry is hurting economically, the Arizona Daily Star is offering a $1 million prize to contest participants who create a perfect bracket. While many will take this bait, the fact of the matter is that companies like the Arizona Daily Star know that the likelihood of paying out on a perfect bracket is slim to none. According to Bell, there are 9.2 quintillion different bracket combinations. Thus, if everyone on the planet each randomly filled out a bracket, the odds would be over one-billion-to-1 of any person having a perfect bracket.

With chances of creating a perfect bracket being slim, how then can basketball fans maximize their chances of March Madness bracket success? Bell offers several tips. First, Bell notes that one resource fans often overlook is Vegas' point spread. "Most people don't know what point spreads are. There is no predictor better than the Las Vegas spread." Bell provided an example of how using the point spread could help bracket creators with their picks. "Minnesota is an 11-seed, but they're favored by three points over UCLA. If UCLA loses this game, the guys on TV will call it an upset. The reality though, is it wouldn't be an upset because Vegas says Minnesota is supposed to win that game."

When it comes to the first round of play, Bell cautions against picking 15 and 16-seeded teams to win. 16-seeds are 0 for 112 while 15-seeds are 6 for 112 games. However, if you want to pick an upset in the first round, picking a 3 or 4-seed to lose might be your best bet. 18 percent of first round games have been won by 13 and 14-seeds.

As for the second round, Bell suggests sticking with the tournament's top seeds. He notes that 88 percent of #1 seeds make it to the Sweet 16. However, picking a lower seeded team to advance from the round may also be a solid choice, as a double digit seed has made the Sweet Sixteen 26 of 28 years. Yet, it's unlikely that this seed will be one lower than 12, as only 1.6 percent of teams with a seed lower than 12 have advanced to the Sweet 16.

As for the later rounds, more often than not, the Cinderella story ends. History shows that 72 percent of #1 seeds make the Elite 8, while only one team with a seed lower than 11 has ever advanced to the Elite 8, according to Bell. The Final Four has only seen three teams seeded lower than eight in its history. The championshp game has only seen one team with a seeding lower than 6 to play in its game over the last 27 years, according to Bell.

If anything, March Madness and bracket competitions should serve as a fun celebration of a game millions of Americans love to watch. While businesses and Vegas work to capitalize off of it, statistics show that most Americans will earn less than what the collegiate players taking the court will make throughout March Madness: Nothing.